Steps to repro:

1. Open Unity;
2. Open attached project and 'test.unity' scene;
3. Drag 'New Material' material (having terrain shader) by mouse on 'Terrain' gameobject in the Scene View.

Actual result:
Nothing happens (see attached gif video). Unabling to drag material on terrain brings inconsistency within the product, because we can attach materials to other gameobjects (e.g. Plane, Cube, Sphere) by dragging material onto them.

Expected result:
User should be able to drag material on terrain in the Scene View.

Workaround is to attach material in TerrainSettings tab of Terrain's inspector component.

Notes:
- Reproduces on both OSX 10.11.3 and Windows 10;
- Reproducible in: 5.4.0b5, 5.4.0b4, 5.3.2f1, 5.3.1f1.